In reality, links added by WordPress blogroll is actually useless textlinks that are discouraged by Google and most other search engines, especially when the links are paid off or in exchange for a link back.
Thus, linking blindly to external sites MAY (if your blog or website has been caught and labeled by Google machine algorithm as participate in illegal link scheme to boost page rank, although you’re not) severaly negatively discount your own site PageRank (PR) value, or worst, affects your site ranking in search engine results positioning. To avoid any potential backlash from the external links in Blogroll, it’s best to add rel=”nofollow” attribute to the <a> tag in Blogroll as suggested by Google so that no PageRank value is passed through the links, and the links won’t penalize your site ranking.
To automatically add and attach rel=”nofollow” attribute to each and every outgoing links in Blogroll, we need to hack through WordPress core source code file. Go to wp-includes/ directory of your blog root folder, then edit the bookmark-template.php file with any text editor such as vi.
Locate the following line (it’s at line 48 for Wordpress version 2.3.1):
$output .= '<a href="' . $the_link . '"' . $rel . $title . $target. '>';
Append the rel=”nofollow” to the line by changing the line to the following:
$output .= '<a href="' . $the_link . '"' . $rel . $title . $target. ' rel="nofollow">';